Tesco 2014 Annual Report Download - page 63

Provision Current service contracts
Notice period • 12 months’ notice by the Company and six months’ notice by the Executive Director.
• For new appointments the Committee reserves the right to vary this period to 24 months for the initial period of appointment
and for the notice period to then revert to 12 months after the initial 12 months of employment.
Expiry date • Philip Clarke and Laurie McIlwee entered into service agreements with Tesco PLC on 31 May 2011 and 27 January 2009 respectively.
• These are rolling service contracts with no fixed expiry date.
Termination payments (does not apply
if notice is provided, as per the service
agreement, or for termination by
reason of resignation or unacceptable
performance or conduct)
• If the Company terminates a Director’s contract without full notice or it is terminated by an Executive Director in response to a
serious contractual breach by the Company then the Executive has the right to a termination payment to reflect the unexpired
term of the notice.
• For Philip Clarke any termination payment in lieu of notice will be based on base salary and benefits only.
• For Laurie McIlwee his termination payment in lieu of notice is based on base salary, benefits and the average annual bonus
paid for the last two years.
• Our policy for new appointments is that termination payments in lieu of notice will be based on base salary and benefits only.
• Benefits comprise car related benefits, healthcare and health insurance and staff discount.
• No account will be taken of pension when determining termination payments.
• Termination payments will normally be subject to mitigation and paid in instalments to facilitate this (other than for long-serving
Executive Directors or in the event of a change of control of the Company where the termination payment is made in full on departure).
For details of Laurie’s termination payment please see page 51. Where an Executive Director has less than eight years of continuous
service then any termination payment will normally be made in 13 equal four-weekly payments. Where an Executive Director has more
than 15 years’ continuous service then the termination payment is made in full on departure. For periods of continuous service
between eight years and 15 years termination payments will normally be split between initial payments and phased payments.
• Payment in full on termination on change of control arises if company terminates or gives notice within 12 months after
a change of control.
• Where an Executive Director retires from the business they will not normally receive a termination payment.
• The Company’s obligation to continue making phased termination payments will cease when the Executive Director
commences alternative employment.
• In the event of termination an Executive Director may have an entitlement to compensation in respect of statutory rights under
employment protection legislation in the UK and potentially elsewhere.
Other information • The Committee may determine that an Executive Director may remain eligible to receive a pro-rata bonus for the financial year in
respect of the period they remained in employment. The Committee will determine the level of bonus taking into account time in
employment and performance. Where an Executive leaves by reason of death, disability or ill-heath they are entitled to a pro-rata
performance based bonus for the year of leaving.
• In the event that an Executive Director retires from the Company they shall be entitled to retain their private medical cover and annual
medical examinations in retirement. Any Executive Directors appointed from 24 February 2013 will not be entitled to this benefit.
• Under the employment contracts, while in employment Executive Directors are also entitled to sick pay, paid holiday, maternity
and paternity leave.
• Where appropriate the Company will meet an Executive Director’s reasonable legal fees in connection with the termination of
his employment and/or the reasonable cost of out-placement services.
The service agreements are available to shareholders to view at the Company’s registered office.
Share plan rules – leaver provisions
The treatment of outstanding share awards in the event that an Executive Director leaves is governed by the relevant share plan rules.
The following table summarises leaver provisions under the executive share plans. In specific circumstances the Committee may exercise
its discretion to modify the policy outlined to the extent that the rules of the share plan allow such discretion. The Committee will not
exercise discretion to allow awards to vest where the participant is dismissed for gross misconduct.
Death
‘Good leavers’ as determined by the Committee in accordance with
the plan rules
Leavers in other circumstances
(other than summary dismissal)
‘Good leavers’ are: injury, ill-heath or disability, redundancy,
retirement, the entity which employs the Executive ceasing to
be part of the group or any other reason determined by the Committee
taking into account the circumstances of departure and performance.
Executive
Incentive Plan
2014
(deferred bonus
shares)
• Unvested awards vest at cessation.
• Normally 12 months to exercise
(if options).
• Unvested awards vest at cessation (Committee discretion to
defer vesting to normal vesting date).
• Normally 12 months to exercise (if options).
• Awards normally lapse.
Performance
Share Plan 2011
• Unvested awards normally vest on
death. The level of vesting is
determined by the Committee
taking into account performance
and the time elapsed between grant
and death.
• If awards are in the form of options,
participants normally have 12
months from vesting (or cessation
for vested options) to exercise or
a longer period as determined by
the Committee of up to 10 years
from grant.
• Awards granted in the 12 months prior to leaving normally lapse
(where more than one award has been made in the 12 month period
in respect of different financial years the most recent award will lapse).
• If a participant leaves holding three unvested awards (in respect of
different financial years) the most recent granted award shall
normally lapse.
• Other unvested awards normally continue until the normal
vesting date. The Committee will determine the level of vesting
taking into account performance.
• If awards are in the form of options participants normally have 12
months from vesting (or leaving for vested options) to exercise or
a longer period determined by the Committee of up to 10 years
from grant.
• Unvested awards normally lapse unless
the Committee determines otherwise.
• If awards are in the form of options
participants normally have 12 months
from cessation to exercise vested
options or a longer period as
determined by the Committee
of up to 10 years from grant.
All-employee
share plans
• Leaver provisions under all-employee share plans are as determined in accordance with HMRC approved provisions.
Legacy plans
Deferred shares awarded prior to 2014 were granted under the 2004 Executive Incentive Plan. Under this plan in the event that a participant
leaves for ‘good leaver’ reasons (death, injury, ill-heath, disability, redundancy, retirement, the entity which employs the Executive Director
60 Tesco PLC Annual Report and Financial Statements 2014
Directors’ remuneration report continued
2013/14 Policy Report